Should You Investigate Xtep International Holdings Limited (HKG:1368) At HK$4.10?

While Xtep International Holdings Limited (HKG:1368) might not have the largest market cap around , it saw a double-digit share price rise of over 10% in the past couple of months on the SEHK. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. With many analysts covering the stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, what if the stock is still a bargain? Let’s take a look at Xtep International Holdings’s outlook and value based on the most recent financial data to see if the opportunity still exists.

View our latest analysis for Xtep International Holdings

What's The Opportunity In Xtep International Holdings?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. We’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 9.56x is currently trading slightly above its industry peers’ ratio of 9.44x, which means if you buy Xtep International Holdings today, you’d be paying a relatively sensible price for it. And if you believe Xtep International Holdings should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Furthermore, it seems like Xtep International Holdings’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s priced similarly to industry peers. This is because the stock is less volatile than the wider market given its low beta.

What kind of growth will Xtep International Holdings generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Xtep International Holdings' earnings over the next few years are expected to increase by 36%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What This Means For You

Are you a shareholder? It seems like the market has already priced in 1368’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at 1368? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on 1368, now may not be the most advantageous time to buy, given it is trading around industry price multiples. However, the optimistic forecast is encouraging for 1368, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

So while earnings quality is important, it's equally important to consider the risks facing Xtep International Holdings at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of Xtep International Holdings.

If you are no longer interested in Xtep International Holdings, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.